I have broad interests and experience as a journalist, covering the auto business, the consumer-packaged goods industry, entrepreneurship, and others, as well as politics, culture, media and religion. I used to cover the car business for The Wall Street Journal, which nominated me and some colleagues for a Pulitzer Prize for our coverage of General Motors. I've also covered autos for Edmunds.com, AutoTrader.com, Automotive News and Advertising Age. I am a major contributor to Chief Executive Magazine, Brandchannel.com, Townhall Magazine, New Nutrition Business magazine and the Journal, among other outlets. I hope that having lived around Flyover Country for most of my life gives me a grounded perspective.

Hyundai, Kia May Find Mileage Fiasco Hurts Brands in U.S.

Over the last three years, the three hottest brands in the U.S. market have been Ford, Hyundai and Audi. Only Audi remains on an upward arc. Ford has stumbled on its MyFordTouch problems. And now Hyundai may find that its false-mileage mistakes will create more of a quagmire than it bargained for.

Already, Interbrand, the respected global brand-marketing research and consulting firm, is saying that Hyundai and Kia’s brand equity has been hurt by the fact that the U.S. Environmental Protection Agency found the sibling Korean companies made false claims of 40 mpg — too high by 1 to 2 mpg — for six of their nameplates. And filing of a proposed federal class-action lawsuit has ensued quickly.

The companies have admitted wrongdoing, moved to change their mileage ratings on stickers and in communications materials about the models in question, and launched a program of reimbursing owners with debit cards for extra gasoline.

All of that is admirable and will play well with Americans. But Hyundai and Kia’s troubles may be far from over. This episode could sour U.S. consumers against the brands more significantly and for a longer time than is immediately apparent. Apologies and gas cards may not cut it.

One reason is that the mislabeling of the cars’ mileage didn’t happen by accident. Someone at the companies strained to deliver fuel-economy ratings that penetrated the 40-mpg ceiling that has become the benchmark for a “high-mileage” vehicle today, because the mileage figures now being shaved by corrected testing procedures just happen to have dropped each of the models slightly below 40 mpg.

Another factor is that there now is lots of competition also pursuing American consumers who want high-mileage small cars. And their brand executives and dealership-sales staffers will have a field day pointing out Kia and Hyundai’s dishonesty.

Hyundai, especially, also became the brand that could deliver everything to the American car buyer, including ever-improving amenities and quality touches — nay, even to the luxury level — in its new models. And all of that came even with fuel economy of 40 — er, 38 or 39 — miles a gallon.

Neither is the brand flattered by how its transgressions came to light. It isn’t as if Hyundai heard consumers’ first complaints about its 40-mpg claims, ruthlessly investigated them and came forward with a mea culpa, a fix — and then the gas cards.

No, Hyundai had to be shamed into the admission by a grass-roots campaign of skepticism about the mileage claims and then suffer the ignominy of a finding of wrongdoing by an EPA audit. In an era when increasing transparency makes it incumbent on all brands to keep their noses cleaner than ever, Hyundai ended up having to be handed an ugly handkerchief.

This is only the second time since 2000 that EPA has required a manufacturer to re-label a vehicle’s fuel economy and, to date, involves the largest number of models from the same automaker that had to be corrected.

And there’s one more thing. In a sense, Hyundai may have been uniquely able to create a sense of — for lack of a better term — betrayal among American auto consumers.

That is because Hyundai scored so big three years ago by showing Americans that it identified with their financial pain during the depths of the Great Recession. At that time, Hyundai announced its “Assurance” incentive program with great fanfare during the Super Bowl telecast in 2009, promising that the brand would take back a newly purchased Hyundai if the buyer subsequently lost his or her job.

With the falsification episode, Hyundai probably squandered much of the remnant of goodwill from Assurance that still may have been a factor in its continued success in the U.S. market.

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Its not good but remember no massive recalls ie Toyota w the doors on fire and Honda with the civice gas suits. so what do you want a 5 year 60,000 warranty plus a 10 year 100k powertrain and a car that has good reliability ? Or an American / Italian mess like Chrysler and their whining about how the foreign cars are too good wah wah give us money ….! Plus Fyi they are building jeeps in china .. who cares if its just for the chinese?? Money goes to Italy . Go ahead Choose whats 1 mile per gallon vs a tranny repair at 36002 miles eh?

A decade ago, Hyundai was caught overstating the horsepower output of their engines. Did that “scandal” hurt them at all? No. They were caught lying and nobody cared.

And now Hyundai has been caught lying again. But when it comes to gas mileage, only the EPA can lie about it without getting in trouble. Hyundai used the magic marketing figure of “40 MPG” when they didn’t earn it, and their sales took off. The consumer now faces a gas bill about $700 higher over the next 100,000 miles. Will the consumer even notice an extra $7 a month more for gas for their $20,000 vehicle? Hyundai is betting “no”.

I think Hyundai is making the correct bet: consumers won’t notice the extra fuel consumption and the gas card settlement will be viewed as another rebate.

eat you words again …. Gov keeps making everbody else look good .. Hyundai to the rescue again .. Funny how Kia doesnt even have such a program .. they dont need it ! Go buy a an exploding Jeep, intermittent engine toyota ,Crash test failure Camry , civic mess up etc … 5 year 60 k warranty and 10 100 powertrain is a lot better than 2 miles per gallon off … not to mention the other manufacturers are getting some scrutiny as well .